Eurozone exits longest ever recession

The eurozone economy grew by 0.3 per cent in the second quarter of 2013, according to figures from Eurostat.

This growth means the eurozone has exited an 18-month long recession, the longest it has experienced.

Growth was driven by the German and French economies, with their GDPs rising 0.7 per cent and 0.5 per cent respectively.

Fortunes were mixed for the second quarter, with Spain and Italy recording declines in their GDPs by 0.1 per cent and 0.2 per cent respectively.

IHS Global Insight chief UK and European economist Howard Archer says: “While the second quarter expansion was modestly better than expected, the eurozone still faces a tough job developing recovery momentum. Consequently, we expect eurozone GDP to contract by 0.5 per cent in 2013 and then grow by 0.7 per cent in 2014.

“On the face of it, the eurozone’s better-than-expected return to growth in the second quarter reduces the case for the ECB to take interest rates lower. Even so, we would not rule out the ECB eventually taking its key policy rate down from 0.50 per cent to 0.25 per cent. The ECB has provided forward guidance, indicating that it expects the key ECB interest rates to remain at present or lower levels for an extended period of time.”

Capital Economics chief European economist Jonathan Loynes say: “The return to modest rates of economic growth in the eurozone as a whole won’t address the deep-seated economic and fiscal problems of the peripheral countries.

“Overall, then, while the return to economic growth in the eurozone is a welcome development, it would be wrong to think that it will bring an end to the travails of the highly indebted and uncompetitive countries of the periphery. The recession may be over, but the debt crisis is decidedly not.”